Intestacy Rules

onetogo

My mother-in-law passed away in 2012. She owned a bungalow outright with no mortgage.

She lived with a partner; they were not married. In her Will she left the property jointly to her two children, being my wife and bother in law, with a request that her partner should remain in the property until his death, providing he maintained the property and paid the bills.

At the time, the property was registered at the LR in the names of my brother-in-law and my wife, as Tenants in Common, 50/50.

There was also a wish that when the property was sold on the death of her partner, £10,000 should go to each of her three grandchildren.

My brother-in-law passed away in 2017, dying intestate. He was married and had one daughter, one of the three grandchildren mentioned above.

My brother in law’s Will was settled in 2018 under the rules of intestacy. The accounts show my sister-in-law inheriting my brother in law’s 50% share of the property worth X amount. Based on this valuation X, his daughter inherited 50% of everything over £250,000, which was paid in cash at the time.

Subsequently, my mother in laws partner passed away in September 2021. On the sale of the bungalow, my sister-in-law has been advised that due to the increase in value of the property, despite being 50/50 TIC with my wife, she needs to pay 50% of any amount received above the value X, to her daughter.

This does not seem right to me, as the Will was settled in 2018 based on the values at the time, leaving my sister-in-law with 50% of the property. Her daughter is not mentioned on the LR docs at all.

Why would her daughter have any interest in the bungalow after the will was settled in this way in 2018?

Any advice appreciated, TIA.

sheramber

my sister-in-law has been advised

Who advised her?

onetogo

The junior solicitor that produced the original accounts initially advised the daughter / mother this to be the case, after consulting with a senior partner, she said that there may have been a misunderstanding. I would just like to understand the situation as it does not affect me personally, but my sister in law asked for my opinion, which is odd as I have no experience with legal matters, which is why I asked the question on this forum.

msb1234

A dies and leaves her house to B and C as tenants in common until D dies. B died before D, without a will.
Id say that maybe Bs estate couldn’t, or shouldn’t, have been fully settled at the time of his death because it would have been dependent on the value of the property he owned after the death of D.
according to the rules of intestacy, his wife should have received £270K, and half of the remainder with the balance going to his daughter. 

If the house was valued at the time of his death for, say £750K, his share would be £375K, his wife would get £270K plus £50.5k = £320.5k, with his daughter receiving the remaining £50.5k.
However, as the house could not be sold until D died some years later, it’s value could have increased significantly. Eg now worth £1m. His share is now worth £500k. Widow still gets £270k, plus half of £225k = £382.5k. Daughters share should be £112.5k. 

The daughter has significantly lost out. 

onetogo

Thanks for the response. Are you saying that despite the Will being settled in 2018, leaving 50% of the property with my sister-in-law, her daughter is still entitled to 50% of the increase in value? Would it be practicable to only settle my late brother-in-laws estate after D died, he could have lived for a further 15 years, or more? 

msb1234

onetogo said:

Thanks for the response. Are you saying that despite the Will being settled in 2018, leaving 50% of the property with my sister-in-law, her daughter is still entitled to 50% of the increase in value? Would it be practicable to only settle my late brother-in-laws estate after D died, he could have lived for a further 15 years, or more? 

No, I'm pointing out that there may be concerns about the way his ownership of the house was handled when he died.

onetogo

Thanks for the clarification.

Keep_pedalling

I am still trying to get my head round this, but the way I see it is that when BIL died in 2017 his estate was distributed under the laws of intestacy and the daughter got her share paid in cash (which would suggest either his estate had enough cash assets to pay that legacy or her mother bought out her share for cash) 

If that is the case then the estate was wound up correctly and the daughter has no further claim, as before the house was sold it was owned 50/50 between your wife and SIL and the proceeds shared between to two less CGT. 

theoretica

Did MIL leave a formal life interest trust to her partner or just a request that could have been ignored?  If it was a formal trust I believe the situation will be very different (and complicated) from if it was not.

How was the house valued in 2018?  Is the increase in value a true increase or an indication that the property was incorrectly valued then.

onetogo

The Will was written by my MIL. The provision for her partner to stay in the property was a wish, as everything was left to my wife and late BIL. The valuation was accurate for the time, assuming there was no occupant, which clearly was not the case, as my wife and BIL complied with their mother’s wishes, to allow her partner to reside there.

The increase in value is a reflection of the housing market over recent years.

Keep_pedalling

onetogo said:

The Will was written by my MIL. The provision for her partner to stay in the property was a wish, as everything was left to my wife and late BIL. The valuation was accurate for the time, assuming there was no occupant, which clearly was not the case, as my wife and BIL complied with their mother’s wishes, to allow her partner to reside there.

The increase in value is a reflection of the housing market over recent years.

As far as I can see none of this means the daughter is owed any money, the only complication is capital gains tax, which your wife is subject too from the date she inherited and your SIL from the date she inherited from her husband (which should be less).

if your SIL wants her daughter to get more of her share she can gift it to her.